Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales and Use Tax Annotations


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R

460.0000 REIMBURSEMENT FOR SALES TAX—Regulation 1700

Annotation 460.0149

460.0149 Posted Sign—All Prices Include Sales Tax. A retailer posts a sign that states: "All Prices Include Sales Tax." The retailer sells an item for consumption on his premises and reports it as taxable, taking a tax-included deduction allowance. He sells the same item to go, at the same price as for consumption on the premises, and deducts the full sales price as an exempt to-go sale.

Civil Code section 1656.1 provides a presumption that the parties agreed to the addition of sales tax reimbursement if a sign is posted that reimbursement will be added to the sales price "of all items or certain items, whichever is applicable." Based on this provision, it must be presumed that the parties agreed to the addition of sales tax reimbursement to the sales price of all items, even exempt sales, in conformity with the sign actually posted by the retailer. That is, the retailer represented that the sales tax reimbursement would be collected on exempt sales and the customer paid it. This is excess tax reimbursement under Revenue and Taxation Code section 6901.5. However, it is excess tax reimbursement by virtue of the presumption set forth in Civil Code section 1656.1. That presumption is rebuttable. (Section 1656.1(d).) To rebut the presumption, the retailer would have to show that the amount presumed to have been represented and paid as sales tax reimbursement was understood by the purchaser to have been for some other purpose.

On the other hand, if the sign states, "all prices include applicable sales tax," there would be no excess tax reimbursement included. The meaning of this sign is that sales tax reimbursement is added only to those sales which are taxable. 7/2/87.